Key points
- Manmade fibre (headings 5501–5507) and filament tow: 18% → 5%.[1]
- Manmade yarn (5402–5406, 5509–5511) and sewing thread of manmade fibres: 12% → 5% (a few filament yarn items were at 18%).[1]
- Apparel and made-ups (chapters 61, 62, 63) up to ₹2,500 per piece: 5% (the Council lists this as a change in value, not rate). Above ₹2,500: 12% → 18%.[1]
- Effective 22 September 2025.[1]
- Raw cotton supplied by agriculturists stays under reverse charge, and refunds of accumulated credit for inverted duty remain available.[2]
The chain, before and after
| Stage | HSN | Before | From 22-09-2025 |
|---|---|---|---|
| Manmade staple fibre, filament tow | 5501–5507 | 18% | 5% |
| Synthetic or artificial filament yarn | 5402–5406 | 12% (some items 18%) | 5% |
| Yarn of manmade staple fibres | 5509–5511 | 12% | 5% |
| Sewing thread of manmade fibres | 5401, 5508 | 12% | 5% |
| Labels, braids, embroidery, zari borders and similar | 5807–5810 | 12% | 5% |
| Carpets and textile floor coverings | 5701–5705 | 12% | 5% |
| Apparel and made-ups, sale value up to ₹2,500 per piece | 61, 62, 63 | 5% | 5% |
| Apparel and made-ups, sale value above ₹2,500 per piece | 61, 62, 63 | 12% | 18% |
Woven fabrics of cotton, silk and manmade fibres do not appear in the Council's change lists. Confirm the rate on your exact heading in Notification 09/2025-CTR or the HSN finder before billing.[1][3] சரிபார்
Why yarn and fibre came down: inverted duty
Before September 2025, a weaver buying manmade yarn at 12% and selling fabric at 5% collected less tax than it paid, so credit piled up in its ledger. The Council called the cut a correction of a "long-pending inverted duty structure" for manmade textiles.[1] Where inputs still carry more tax than outputs, for example dyes and chemicals at 18%, the Department's FAQ points out that refund of accumulated credit is available, and the Council asked for 90% provisional refunds on inverted duty claims based on system risk checks.[1][2] On 8 October 2026 the 57th Council also recommended refunds of credit on input services for inverted duty, for credit taken on or after 1 November 2026, once notified.[4]
Billing near the ₹2,500 line
The rate for garments and made-ups depends on the sale value per piece.[1] For a wholesaler that raises practical questions:
- Per piece, not per bill. A bill of 40 kurtis at ₹1,800 each is 5% on every line, even though the bill is ₹72,000.
- Sets. For made-up sets under chapter 63, the Council's entry speaks of "sets of sale value" up to ₹2,500, so the set price is what counts.[1]
- Discounts on the bill. Whether an on-bill discount that takes a ₹2,600 piece to ₹2,340 changes the rate depends on what "sale value" means for that supply; ask your CA before you build a scheme around it. சரிபார்
- Mixed bills. One bill can carry both rates; each line needs its own HSN and rate.
Worked example, in rupees
Shree Laxmi Sarees, Ring Road, Surat (sample firm) sells to a retailer in Pune (inter-state, so IGST):
| Line | Qty × piece price | Taxable value | Rate | IGST |
|---|---|---|---|---|
| Printed sarees | 60 × ₹950 | ₹57,000 | 5% | ₹2,850 |
| Embroidered lehengas | 10 × ₹2,400 | ₹24,000 | 5% | ₹1,200 |
| Bridal lehengas | 4 × ₹6,500 | ₹26,000 | 18% | ₹4,680 |
| Total | ₹1,07,000 | ₹8,730 |
The bill total is ₹1,15,730. Before 22 September 2025, the bridal lehengas would have carried 12% (₹3,120), so the same order cost the retailer ₹1,560 more in tax afterwards. The sarees and ₹2,400 lehengas did not change. The consignment is above ₹50,000 including tax, so an e-way bill is needed for the move to Pune.
For a trader: purchases, credit and parcels
A wholesaler who buys sarees at 5% and sells them at 5% has no inversion; its credit simply passes through. The change bites where a trader buys garments under ₹2,500 a piece and sells some above ₹2,500 after adding work or value, or buys above and sells below. Keep separate item codes so purchases and sales of the same design carry the right rate on each side.
Parcels to other states need an e-way bill once the consignment value with tax is above ₹50,000, so a ₹48,000 order of 5% sarees (₹50,400 with tax) needs one. Consignments sent through a transporter's godown can skip Part-B for the first 50 km within the state, but it must be filled before the goods move further. See e-way bill limits by state.
Input tax credit for a wholesaler
A trader who buys fabric or garments at 5% and sells at 5% is not hurt by the yarn and fibre cuts; the change mostly helps spinners and weavers whose inputs used to carry 12% or 18%. Where a wholesaler buys garments above ₹2,500 a piece, it now pays 18% and charges 18%, so its credit and output move together. The pinch is on services such as rent, transport and packing at 18% against sales at 5%: watch whether credit builds up in the ledger, and ask your CA whether a refund claim is worth making.[2][4]
What to update
- Split items above and below ₹2,500 a piece into separate item codes so the rate never depends on memory.
- Update yarn and thread purchase rates to 5% in your purchase bills from 22 September 2025.
- Check whether credit still builds up (for example 18% on services and packing) and talk to your CA about refunds.
- Use 6-digit HSN on every line if aggregate turnover is above ₹5 crore.
- Reprint price lists for pieces above ₹2,500; the tax-inclusive price went up.
How Moharbill helps
- GST rates with effective dates, so 5% or 18% is picked per line and old bills keep their old rates.
- Bills in Gujarati or English, with WhatsApp reminders in the retailer's language. See wholesale billing and Surat.
- E-invoice and e-way bill on save for inter-state orders; see e-invoice software.
Frequently asked questions
What is the GST rate on garments above ₹2,500?
From 22 September 2025, apparel and clothing accessories of chapters 61 and 62, and made-ups of chapter 63, with a sale value above ₹2,500 per piece are taxed at 18%, up from 12%.
What is the GST rate on garments up to ₹2,500?
5% for apparel and made-ups with a sale value up to ₹2,500 per piece. The Council described this as a change in the value limit, not in the rate.
What is the GST rate on polyester yarn now?
Synthetic and artificial filament yarn and yarn of manmade staple fibres moved from 12% to 5% from 22 September 2025.
Is the ₹2,500 limit per bill or per piece?
Per piece (or per set for made-up sets). A bill of many pieces each priced below ₹2,500 is taxed at 5% on each line.
Can textile traders get a refund of accumulated ITC?
Refund of accumulated credit due to inverted duty is available under GST, and the 56th Council asked for 90% provisional refunds on a risk basis. Ask your CA whether your inputs and outputs qualify.
Sources
All read on 17 Oct 2026.
- PIB, "Recommendations of the 56th Meeting of the GST Council", 3 Sep 2025, Annexure II section 7 (Textile sector) and implementation dates. gstcouncil.gov.in
- PIB, "Frequently Asked Questions (FAQs) on the decisions of the 56th GST Council" (cotton under reverse charge; refund of inverted duty credit). pib.gov.in
- PIB, "Recommendations of the 57th Meeting of the GST Council", 8 Oct 2026, para C1 (Notification No. 09/2025-CTR dated 17.09.2025). gstcouncil.gov.in
- Same release, para B1.8 (refund of ITC on input services for inverted duty, credit availed on or after 1 Nov 2026). gstcouncil.gov.in
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